Programmatic is UPS not NASDAQ. There, I said it. But c'mon, enough is enough. In our space, programmatic exchanges are not 'exchanges', private marketplaces are not 'marketplaces', many of the impressions sold are never seen, and many of the audience members are bots. So what do all of the programmatic solutions do? They are delivery pipes with a fancy billing system. The five major pillars of a market's mission are violated in the current programmatic ecosystem. So, today's programmatic environment is all about managing delivery not creating the ideal environment for buyers and sellers to come together. Continuing with our allegory, UPS only cares that the box gets to its destination, it has nothing to do with its contents nor are they culpable if the seller ripped off the buyer. NASDAQ has nothing to do with getting the good to their destination, they ensure that what is bought and sold is what was represented and at the best price available.
The mission of any transactional environment is comprised of five fundamental pillars: resource allocation, price discovery, protection, reliability, and equal treatment. Without these, market imbalances will make such trading environments untenable. While some may benefit in the short term, dysfunctional markets give traders the incentive to seek other transactional venues.
Our definitions of each pillar of the mission:
Resource allocation: the purpose of a market is to establish prices so that buyers and sellers can efficiently allocate resources and make better business decisions. If prices are not negotiated within a bidding environment and are not disseminated, how can resource allocation decisions be made effectively if there is no real confidence that the price of the transaction is a fair one?
Price Discovery: Fair and orderly discovery of market prices by traders is key to a market's trustworthiness. Fair and orderly means that all participants are afforded equal treatment, information is provided in a timely manner, there is transparency of market prices, a consistent matching algorithm, fast and easy access, and accurate post trade information.
Reliability: a set of exchange requirements defining integrity, fault tolerance, disaster recovery, recoverability, availability, scalability, and execution speed.
Equal Treatment: Every market participant receives equal access to the exchange and public information is provided to all participants at the same time.
Protection: ensuring that the four other pillars are enshrined in the rules of the exchange, the contracts of exchange members, and the operation of the exchange environment .
This is what real exchanges are all about.